Enterprise Products: The "Best-Run MLP"

06/09/2017 2:56 am EST


Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

First quarter results at Enterprise Products Partners LP (EPD) and recent project announcements underscore why the midstream operator remains a foundational holding and one of the best-run master limited partnerships (MLP) around, says Roger Conrad, editor of Conrad's Utility Investor.

The blue-chip MLP increased its quarterly distribution at the familiar rate of $0.005 per unit and generated enough cash flow to cover this payout by 130 percent — retaining $238 million in cash flow to help fund its pipeline of growth projects.

Natural gas liquids (NGL) pipelines and services benefited from project start-ups, improved gas-processing margins and higher pipeline throughput, all of which helped to offset weaker volumes in the Eagle Ford Shale.

A similar scenario played out in the crude oil pipelines and services segment, where surging output in the Permian Basin countered declining production in the Eagle Ford Shale, a headwind that should abate in coming quarters.

Recovering production in formerly out-of-favor shale plays represents a bonus. For Enterprise Products Partners, the next wave of growth opportunities involve leveraging its integrated system to secure expansion projects in the Permian Basin and the build-out of petrochemical capacity on the Gulf Coast.

For example, Enterprise Products Partners announced plans to accelerate the construction of its Sealy-to-Midland crude pipeline to meet customer demand in the Permian Basin.

On the petrochemical side, Enterprise Products Partners recently unveiled plans to repurpose some of its Gulf Coast ethane storage to accommodate ethylene, an olefin that’s one of the basic building blocks of many plastics and synthetic materials.

In addition to impressive growth prospects, Enterprise Products Partners also boasts a strong balance sheet and a high-quality management team that has proved itself to be smart allocators of capital.

Enterprise Products Partners accounts for a whopping 18.5 percent of the Alerian MLP Index (AMZ), which means that inflows into popular MLP-focused fund products can enhance or weigh on the stock’s performance.

This idiosyncrasy can create buying opportunities for nimble investors. Buy Enterprise Products Partners LP up to $33 per unit.

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